Michael Dell: What’s in it for him?

By taking Dell private, tech pioneer makes another big bet

By

BenPimentel

SAN FRANCISCO (MarketWatch) — With his plan to take Dell Inc. private, Michael Dell opens a new chapter in his journey from bad boy to bruised veteran of the tech industry, the pioneer who got some things right, and others wrong.

Reuters

Dell Inc. founder and CEO Michael Dell.

The $24.4 billion buyout deal is his latest big bet aimed at clearing the path in Dell’s bid to transform itself into a formidable corporate IT powerhouse, though some analysts say going private isn’t going to get rid of the company’s daunting market challenges.

Why is the founder and CEO of Dell Inc.
US:DELL
taking the company private?

“Reputation and greed, in our view,” Discern analyst Cindy Shaw said in a note. “We believe Michael Dell is once again hungry. Thirty years ago, we think he hungered for success and wealth. In 2013, we think he hungers to restore his legacy and personal balance sheet.” Full story: Dell to go private in $24.4 billion deal.

IMichael Dell’s legacy is marked by a maverick streak and a reputation as a disrupter.

He famously annoyed Steve Jobs by publicly saying in 1997 that if it were up to him to decide what to do with the then-struggling Apple Inc., he would “shut it down and give the money back to the shareholders.”

Michael Dell is taking his company private for reasons of ‘reputation and greed, in our view.’
Cindy Shaw, Discern

A decade ago, he strongly suggested that Sun Microsystems was doomed.

Michael Dell was wrong on Apple
AAPL, -0.87%
and right on Sun, whose CEO, Scott McNealy, had once dismissed Dell as “the greatest spare-parts distributor out there.”

That attack was based largely on the business model Michael Dell cooked up as a teenager, selling PCs out of his University of Texas dorm room — and which helped him shake up in the tech industry and compete against much older and larger rivals such as Hewlett-Packard
HPQ, -0.33%
and IBM
IBM, +0.64%

Dell kicked off his storied career by selling PCs directly to consumers, doing away with middlemen. And he did it fast, with pretty much no inventory and negligible investment in research and development, relying mainly on the innovations of his two key partners, Intel Corp.
INTC, +0.14%
and Microsoft Corp.
MSFT, -0.38%

By the early 2000s, Dell was the king of PCs, besting even H-P, which initially could not keep up with the Texas juggernaut even after the Silicon Valley icon gobbled up Compaq Computer.

Some of Dell’s rivals dismissed the company as the Wal-Mart of the tech industry, deriding it as a lowly assembler and re-seller of other companies’ innovations.

But Dell’s direct-sales model was so successful that Michael Dell gambled by taking on the server market. It worked, turning Dell into a server powerhouse, outmaneuvering the once-dominant Sun Microsystems. He then took aim at additional markets, including handsets, networking gear and printers.

Just 10 years ago, Dell was on a roll. Asked by a New York Times reporter about repeated criticisms of the Dell model and direction, Michael Dell quipped, “I’ve seen this movie before. Hey, order the popcorn. I’m going to enjoy it.”

But then the market changed. PCs lost momentum. Consumers turned to new devices, as seen in the rise of smartphones and tablets.

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